Document of The World Bank

FOR OFFICIAL USE ONLY

Report No: 35449

IMPLEMENTATION COMPLETION REPORT(IF-N0430)

ON A

INTERIM TRUST FUND CREDIT

IN THE AMOUNT OF US$273.0 MILLION

TO THE

PEOPLE'S REPUBLIC OF BANGLADESH

FOR A

THIRD ROAD REHABILITATION AND MAINTENANCE PROJECT

March 1, 2006

Energy and Infrastructure Sector UnitSouth Asia Region

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective September 30, 2005)

Currency Unit = Bangladesh Taka(Tk.) Tk. 1.000 = US$ 0.015US$ 1.000 = Tk. 65.480

FISCAL YEARJuly 01 June 30

ABBREVIATIONS AND ACRONYMS

BRAC Bangladesh Rural Advancement Committee MIS Management Information SystemsBRTA Bangladesh Road Transport Authority MoC Ministry of CommunicationsCAS Country Assistance Strategy MOF Ministry of FinanceCE Chief Engineer MTR Mid-Term ReviewCIDC3 Consolidation of Institutional Development Component NCB National Competitive BiddingCMS Central Monitoring System NGO Non-Government OrganizationCUL Compensation Under Law N-H-B Nalka-Hatikumrul-Bonpara RoadDBST Double Bituminous Surface Treatment O&M Operation and MaintenanceDC District Commissioner OPD Office of Project DirectorDCA Development Credit Agreement PAD Project Appraisal DocumentDFID Department of International Development, United Kingdom PAP Project Affected PeopleD-S Dhaka-Sylhet Road PD Project DirectorEA Environmental Assessment PDO Project Development ObjectiveEMAP Environmental Management Action Plan PPR Public Procurement RegulationEOP End of Project PSC Project Steering CommitteeERR Economic Rate of Return QAE Quality at EntryFIDIC International Federation of Consulting Engineers QAG Quality Assurance GroupFMR Financial Management Report QCBS Quality and Cost Based SelectionFMS Financial Management System R&R Resettlement and RehabilitationFRA Feeder Road Type A RAP Resettlement Action PlanGoB Government of Bangladesh RHD Roads and Highways DepartmentHDM-4 Highway Development and Management Model RMI Road Maintenance InitiativeICB International Competitive Bidding RRMP III Third Road Rehabilitation and Maintenance ProjectICR Implementation Completion Report RSRP Road Sector Reform ProjectIDA International Development Association SBD Standard Bidding DocumentIDC Institutional Development Component SE&ME Socioeconomic Monitoring & EvaluationIMTP Integrated Multi-Modal Transport Policy SEA Social and Environmental AssessmentIRI International Roughness Index SIA Social Impact AssessmentISAP Institutional Strengthening Action Plan SOE Statement of ExpenditureITF Interim Trust Fund TA Technical AssistanceJV Joint Ventures UFMS Unified Financial Management SystemLGED Local Government Engineering Department VOC Vehicle Operating Cost

Vice President: Praful C. PatelCountry Director Christine I. WallichSector Manager Guang Z. Chen

Task Team Leader: Stein Lundebye/Ke Fang

BANGLADESHTHIRD ROAD REHABILITATION AND MAINTENANCE PROJECT

CONTENTS

Page No.1. Project Data 12. Principal Performance Ratings 13. Assessment of Development Objective and Design, and of Quality at Entry 24. Achievement of Objective and Outputs 65. Major Factors Affecting Implementation and Outcome 126. Sustainability 147. Bank and Borrower Performance 148. Lessons Learned 169. Partner Comments 1810. Additional Information 27Annex 1. Key Performance Indicators/Log Frame Matrix 28Annex 2. Project Costs and Financing 29Annex 3. Economic Costs and Benefits 31Annex 4. Bank Inputs 35Annex 5. Ratings for Achievement of Objectives/Outputs of Components 36Annex 6. Ratings of Bank and Borrower Performance 37Annex 7. List of Supporting Documents 38

Project ID: P037294 Project Name: Third Road Rehabilitation & Maintenance

Team Leader: Ke Fang TL Unit: SASEIICR Type: Core ICR Report Date: March 9, 2006

1. Project DataName: Third Road Rehabilitation & Maintenance L/C/TF Number: IF-N0430

Country/Department: BANGLADESH Region: South Asia Regional Office

Sector/subsector: Roads and highways (86%); Central government administration (14%)Theme: Improving labor markets (P); Rural services and infrastructure (P); Access to urban services

and housing (P); Small and medium enterprise support (S)

KEY DATES Original Revised/ActualPCD: 11/09/1995 Effective: 05/16/1999 05/16/1999

Appraisal: 11/15/1997 MTR: 11/26/2001Approval: 10/01/1998 Closing: 12/31/2003 12/31/2005

Borrower/Implementing Agency: GOB/ROADS & HIGHWAYS DEPARTMENTOther Partners: DEPARTMENT OF INTERNATIONAL DEVELOPMENT, UNITED

KINGDOM

STAFF Current At AppraisalVice President: Praful C. Patel Mieko NishimizuCountry Director: Christine I. Wallich Pierre Landell-MillsSector Manager: Guang Z. Chen Frannie HumplickTeam Leader at ICR: Ke Fang Arun BanerjeeICR Primary Author: Ke Fang

2. Principal Performance Ratings

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible)

Outcome: S

Sustainability: L

Institutional Development Impact: M

Bank Performance: S

Borrower Performance: S

QAG (if available) ICRQuality at Entry: S S

Project at Risk at Any Time: Yes

3. Assessment of Development Objective and Design, and of Quality at Entry

3.1 Original Objective:3.1.1 Context The objective and the design of the Third Road Rehabilitation and Maintenance Project (RRMP III) need to be assessed in the context of (i) the economic, political, and institutional conditions prevailing in Bangladesh in the past decade; and (ii) the overall development in the transport sector in the same period. In the mid-1990s when the project was prepared as a follow-up to two previous road projects, the country’s economic and growth prospects suffered from the effects of devastating floods, confrontational politics, and other unrest. Although Bangladesh did make strides in macroeconomic management and improving opportunities for the poor during the mid-1990s, the government’s commitment to policy and institutional reforms was not stable. In the transport sector, the national road network covered the country adequately after heavy investment in roads, but it suffered from a backlog of needed rehabilitation, a lack of proper maintenance, and poor quality of feeder roads. Furthermore, the previous two Bank-funded road projects concluded that the Road and Highways Department (RHD), which was responsible for managing the national road network, was weak in road planning and maintenance. In response to these conditions, the RRMP III was prepared to strengthen efforts to improve the efficiency and safety of the road networks by improving maintenance of the national and regional roads, removing critical bottlenecks in the overall transport system, and strengthening institutional capacity of the RHD.

3.1.2 Project Development Objective (PDO) The PDO defined in the Project Appraisal Document (PAD) dated June 26, 1998 and Development Credit Agreement (DCA) dated October 21, 1998 was to reduce the total cost of road transport on Bangladesh's most traveled roads. The PAD further stated that the PDO would be achieved through accomplishment of the following sub-objectives:

(i) reducing "bottlenecks" by expanding and improving critical road links in the overall transport system i.e. the Nalka-Hatikamrul-Bonpara (N-H-B) Road; rehabilitation of the Dhaka-Sylhet (D-S) Road; improvement of the Feeder Roads 'A' network (FRA), and the widening of critical narrow bridges on the national and regional road network in the Northwest and Southwest regions of the country;

(ii) improving the institutional capacity of the RHD in road maintenance and improved financial management;

(iii) improving road safety by developing the institutional capacity in RHD to identify hazardous locations and to design and implement physical measures to reduce road accidents at these locations;

(iv) promoting private sector development (i.e. medium-size contractors) through contracting out FRA road works now undertaken by smaller and less sophisticated contractors; and

(v) wherever conditions permit, use of labor-intensive methods for road construction and maintenance to create employment and reduce poverty.

3.1.3 Relevance of PDO. The PDOs reflected priorities for transport development in Bangladesh at the time of appraisal, as identified by the Government of Bangladesh (GoB) and the Bank’s Country Assistance Strategy (CAS, 1998). The PDO was consistent with the government strategy for reducing poverty and promoting growth, which stressed the importance of reducing the total cost of road transport through adequate provision and maintenance of road infrastructure. The project objective also reflected the priorities identified in the 1998 CAS which highlighted the strategic importance of institutional development in Bangladesh. In the transport sector, the CAS emphasized that "selective Bank support must be guided by priorities for poverty alleviation and removal of critical bottlenecks."

3.1.4 Clarity of PDO. Assessment of the PDO was slightly hindered by the lack of consistency in

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project documentation - the PDO was stated differently in various parts of the PAD, quite likely because the PDOs were modified at the final stages of project preparation but were not appropriately updated in the PAD. There were too many sub-objectives, and in fact, some of these sub-objectives, in particular (ii) and (iii) cited above, focused on just inputs and processes rather than relevant outcomes. The performance indicators (PI) could also have been designed more thoroughly to enable effective monitoring and evaluation during and after project implementation. For example, some PIs did not have baseline data, and no indicator was designed for monitoring and measuring outcomes of the institutional development component.

3.2 Revised Objective:3.2.1 The PDO remained the same as defined in the PAD throughout implementation.

3.3 Original Components:3.3.1 According to the DCA, the project originally had the following three components, and each component had several sub-components (note: all costs include contingencies):

Physical Investments (US$449.9 million at PAD; US$381.5 million at ICR, excluding cost of the 2000 flood restoration project) which include:

(A1) Nalka-Hatikamrul-Bonpara (N-H-B) Road (US$73.0 million at PAD; US$62.6 million at ICR): Construction of about 55 km for a new road connecting Nalka, Hatikamru, and Bonpara that would provide a link with the western approach of the Jamuna Bridge from Nalka Bridge to connect National Highway N5 at Hatikamrul and N5 to Bonpara;

(A2) Dhaka-Sylhet (D-S) Road (US$178.5 million at PAD; US$152.3 million at ICR): Rehabilitation and widening of 250 km of the Dhaka-Sylhet road and an existing section of National Highway N2 from Katchpur to Sylhet, which links with the Indian border at Tamabil;

(A3) FRA Program (US$96.0 million at PAD; US$73.6 million at ICR): Rehabilitation of about 500 km of FRA, which were identified as ones with highest priorities for the Northwest and Southwest regions in the FRA Improvement Master Plan developed under the IDA financed RRMP-II;

(A4) Narrow Bridges (US$11.6 million at PAD; US$15.1 million at ICR): Reconstruction of existing narrow bridges (about 1,000 meter total span) and culverts on national and regional roads in the northwest and southwest regions where periodic maintenance work was completed under IDA financed RRMP-I and RRMP-II. This sub-component was proposed to be financed by DFID under their on-going small bridge construction program with RHD;

(A5) Periodic Maintenance (US$70.9 million at PAD; US$63.2 million at ICR): Carrying out of periodic maintenance of about 1,000 km of national and regional roads in the northwest and southwest regions of Bangladesh;

(A6) Road Safety Measures and Equipment (US$20.0 million at PAD; US$14.6 million at ICR): Removal of accident black spots to improve traffic safety, and strengthening of road safety on national and regional roads completed under RRMP-I and RRMP-II, through the acquisition and installation of axle load control equipment, reflectorized traffic signs, thermoplastic road markings, and police training equipment.

Technical Assistance (TA) (US$41.6 million at PAD; US$44.56 million at ICR), including:(B1) Policy support for (i) an Axle Load Control Management Study; and (ii) a Study for the

rationalization of RHD’s plant, equipment and ferry operations; (B2) Institutional development component (IDC3), funded by DFID, including (i) additional

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organizational improvements within RHD to strengthen its capacity for improved maintenance and road safety; (ii) to improve RHD's financial management systems; and (iii) to provide the necessary technical assistance to strengthen the National Traffic Police Training Center;

(B3) Project preparation and implementation, including supervision of implementation of the physical investments and preparation of a follow-up project; and

(B4) Training of project staff.

Land Acquisition and Resettlement (US$37.0 million at PAD; US$37.80 million at ICR): Carrying out of a program of land acquisition and resettlement affecting about 32,310 households (including 18,200 land owners, 12,191 squatters, and 1,919 employees) living, cultivating, or working in the project area. This component would be fully financed by the GoB and it will implement resettlement action plans (RAPs) prepared under guidance of both the Bank's Operational Directive 4.30 on involuntary resettlement and GoB's land acquisition laws and regulations.

3.3.2 Assessment of the design of the components. The physical investment components were pragmatically designed to support achievement of the project objectives described above. The detailed design of these components also took into consideration priorities set up in GoB's 1991 Road Master Plan and lessons learned in the previous two road projects. In addition to the major physical investments, a sizable institutional development component (IDC3) was included in the project to support institutional development in the road sector. However, the IDC3, which was to be co-financed by DFID through bilateral grant financing, was not fully defined by the time of project appraisal. As a result, the appraisal of the level of commitment from the government on insitutional development in PAD was inadequate. No strong link was established between the investment components and the IDC3. The design of the IDC3, which was carried out later on mainly by the DFID consultants through their bilateral discussions with RHD, lacked substantive targets for outputs and outcomes expected in relevant areas of RHD's performance and presented no direct focus on the sustainability of new RHD responsibilities. Furthermore, the IDA supervision team, which was short of an institutional specialist at the early stage of implementation, did not provide adequate critical inputs to the design of the IDC3. 3.4 Revised Components:3.4.1 Some changes were made in the project components during implementation. Implementation of Component A4: Narrow Bridges (funded by DFID) was delayed due to change in the scope of DFID's support to road bridges in Bangladesh. The component finally was separated from RRMP-III and became part of a DFID-funded road bridge improvement project that aimed to address not only rehabilitation of road bridges, but also maintenance and management. Among 46 contracts initially included to the RRMP, 36 have been awarded and work has been in progress by end of 2005. Completion of the DFID project is scheduled for June 2007.

3.4.2 Components A6 was consolidated into a Road Safety Improvement program which consisted of five major items: removing accident black spots; installation of traffic signs and road markings; acquisition of axle load control equipment; a community road safety awareness campaign; and production of an animated film on road safety. The program did not include the purchase of traffic police training equipment, which initially was part of Component A6, but was cancelled during MTR (mid-term review) in December 2001 due to the lack of ownership and commitment regarding strengthening of the traffic police. However, a study for the introduction of a Highway Patrol System was incorporated into the consultancy services for supervision of FRA, as part of the Technical Assistance component.

3.4.3 Component B2: IDC3 was slightly modified during implementation before it was closed in

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January 2003. A Consolidation of Institutional Development Component (CIDC3) was then established as a follow-up to continue DFID's institutional development support to the MoC (Ministry of Communications) and RHD. After learning lessons from IDC3, DFID improved the design of CIDC3 which was intended to focus on the following expected outputs instead of just inputs: (i) Output 1 – Restructuring of RHD and fulfillment of its role within the National Land Transport Plan (NLTP); (ii) Output 2 – Improved financial management of RHD; (iii) Output 3 – Improved management and maintenance of the RHD network; (iv) Output 4 – Improved MoC operations including policy and planning; (v) Output 5 – Establishment of an effective Transport Sector Coordination Wing in the MoC as set out in the NLTP; and (vi) Output 6 – Submission of a Road Maintenance Fund Bill to Parliament. Yet the new approach still addressed capacity issues but not organizational effectiveness, including operational autonomy, staff motivation, etc. The design of CIDC3 was also weak in selecting robust performance indicators, especially at outcome level.

3.4.4 To address emergency needs that arose after the floods in 2000 and on the request of GoB, a 2000 Flood Restoration Component (US$4.80 million at appraisal; US$4.21 million at ICR) was included as part of RRMP-III to restore those roads which were severely damaged.

3.5 Quality at Entry:3.5.1 A Quality Assurance Group (QAG) assessment carried out in June 1998 rated Quality at Entry (QAE) as satisfactory, citing the strength of experience drawn from two previous projects with RHD, numerous consultant studies, a great deal of country knowledge, a commendable effort to improve road safety, an early effective start for project implementation, and innovative community-based approaches in land acquisition and resettlement. The QAG report also noted that the project had "some weaknesses in the sectoral, institutional, and financial aspects of its design" and "in donor coordination" with other donors such as DFID which co-financed the institutional development component. QAG warned that the weakness could pose substantial risks if not well managed during the remainder of project processing and implementation.

3.5.2 In this ICR, the QAE is rated as moderately satisfactory for the following strengths and weaknesses in the project design (as discussed in the above sections).(i) Strengths:

Relevance of objectives to the priorities for transport development in the country;lStrong country ownership of the physical investment components through significant inputs from lthe Borrower;Considerable amount of expertise that had gone into the project preparation, including lcommendable efforts to improve road safety and road maintenance; Adequate preparation for the physical investment components prior to implementation, including ladvanced tendering for the first year contracts and positioning of the key consultants at the project outset; and Attention given to institutional development and lessons learned from the two previous road lprojects.

(ii) Weaknesses:Lack of strong focus on real outcomes rather than just inputs and outputs in project design;lWeak country ownership of and commitment to institutional development; lWeak design of the IDC3 which lacked adequate assessment of the level of commitment and lsubstantive targets for institutional development;Inadequate design of the performance indicators, which made it difficult for monitoring during limplementation; and Inconsistency in stating PDO and sub-objectives in different parts of the PAD and in the DCA.l

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4. Achievement of Objective and Outputs

4.1 Outcome/achievement of objective:4.1.1 Summary. The achievement of objectives is rated satisfactory, because the overall objective has been achieved and the five sub-objectives, as they were defined in the PAD, have also been broadly achieved.

4.1.2 Overall objective: to reduce the total costs of road transport on Bangladesh’s most traveled roads. This objective has been achieved. The project has exceeded expectations in terms of efficiency of the investment, as the ex-post economic evaluation confirms the economic justification of the project, indicating all economic rate of return (ERR) values at ICR stage are higher than those estimated during appraisal. Savings in vehicle operating costs were estimated at Tk. 32585.71 million (US$ 497.64 million). For more information please refer to Annex 3. Additionally, a number of innovative steps have been taken during the implementation of the project, such as, introduction of toll roads and separate lanes for non-motorized traffic on the N-H-B road (which has helped reduce accidents and significantly increase the efficiency of the new road), introduction of the corridor management concept in the newly constructed by-pass of the D-S road by outsourcing it to a private entrepreneur for operation, and implementation of comprehensive road safety awareness campaigns in the project area.

4.1.3 Sub-objective (i): Providing and improving critical road links (reducing bottlenecks) in the overall transport system. This sub-objective has been achieved through satisfactory completion of physical investments in the critical road links identified by GoB at the time of appraisal, i.e., construction of N-H-B road, rehabilitation of D-S Road, improvement of the FRA, and widening of critical narrow bridges on the national and regional road network. The proportion of the core network in poor condition in the entire country has also decreased from 40 percent in 1998 when the project was appraised, to 24 percent in 2005 (although the target in the PAD is 10 percent by end of project (EOP)). The condition of project roads (measured by IRI, International Roughness Index) has also been significantly improved by an average rate of about 50 percent on all project affected roads, largely because of implementation of the periodic maintenance component of the RRMP-III and the continued pressing by the Bank's supervision team on the issue of increasing the annual maintenance budget. In particular, the construction of the N-H-B road helped reduce travel time between Dhaka and Rajshahi by about 3 hours (40 percent of the previous travel time). The rehabilitation of the D-S road with 69 km of new alignment not only increased travel speed but also reduced the travel distance between Dhaka and Sylhet by 33 km, and travel time has therefore been significantly reduced by more than two hours.

4.1.4 Sub-objective (ii): Improving the institutional capacity of RHD in road maintenance and financial management. After costing about US$45 million, the TA activities and the DFID-funded IDC3 and CIDC3 have achieved limited capacity building within their design parameters. Various main RHD technical functions, particularly in relation to project development, financing, and implementation capacities, have been strengthened through: (i) establishment and operation of the HDM (software) cell, road safety cell, environment and resettlement cell, and Management Information Systems (MIS) and Estate unit; (ii) improved RHD financial management systems; (iii) enhanced management and maintenance of the RHD road network; and (iv) improved operation (including policy and planning) to develop, manage, and maintain a safe and cost effective road transport network.

4.1.5 Sub-objective (iii): Improving road safety. This sub-objective has not been fully achieved if measured strictly by the performance indicator, the road accident fatality rate (fatality per 10,000 vehicles), which has decreased from 76 in 1998 to 60 in 2005 (according to official statistics), while the target set up

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in the PAD is 50 by EOP (see Annex 1: Key Performance Indicators). Some researches and unofficial data even suggest the road safety has not been improved in the past years, or may have become worse at least in some parts of the country. However, the road safety activities of the project, such as removing black spots, improving road marking, installing traffic signs, carrying out a nation-wide road safety study, initiating and implementing the first road section in the country with a dedicated rickshaw/bicycle lane, and implementing road safety awareness campaigns, have significantly helped reduce the number of accidents which may have otherwise increased. In addition, based on a Highway Patrol study funded by the project, a Highway Patrol was established by the government and started its operation in June 2005, although it primarily addresses crimes rather than traffic violations on highways. Therefore, it can be concluded that the implementation of the project helped restrain, if not resolve, the deterioration of road safety in the country.

4.1.6 Sub-objective (iv): Promoting private sector participation. This sub-objectives has been achieved. A number of local contractors and consultants participated in the project and most of them performed well. By the end of the project, 15 (versus 10 targeted in PAD) new contractors for maintenance were engaged, and local consulting assignments for maintenance works had increased by more than 50 percent from PAD targets.

4.1.7 Sub-objective (v): Use of labor-intensive methods for road construction and maintenance to create employment and reduce poverty, whenever conditions permit. This sub-objective has been achieved. Labor-intensive methods have been widely employed for road construction and maintenance under this project. According to estimation of RHD, the implementation of this project created 18 million work-day opportunities to skilled and unskilled workforces and 11,000 person-months for engineers/technicians for road construction activities. The increased economic activity as result of improvement of road conditions on two major corridors and many national, regional, and feeder roads also created considerable new employment.

4.2 Outputs by components:4.2.1 Summary. In general the implementation of the project is rated satisfactory.

Physical Investment4.2.2 The implementation of physical investment components is rated satisfactory. All the civil works contracts, except two small feeder road contracts, have been completed according to the original scope of work. The closing date of the physical investment components was extended for half year mainly due to three large nation-wide floods that occurred during the project implementation period. The two small feeder roads contracts (covering 29 km of feeder roads in total) were terminated ahead of the full completion of the works due to failure of the contractors to perform, despite efforts by the project authority and the IDA supervision missions to correct the situation.

4.2.3 Nalka-Hatikamrul-Bonpara (N-H-B) Road . This component was executed under a total of four contracts awarded through international competitive bidding (ICB) procedures. The construction period was from December 1, 1998 to December 31, 2002, and the completed road was opened to the public on May 10, 2003. The completed work is of satisfactory quality, and includes (i) 51 km of highway with entirely new alignment between Hatikamrul and Bonpara with a 7.3 m carriageway for normal traffic and a 4.0 m wide separate lower lane, located on the south side of the carriageway, for slow moving traffic, such as rickshaws and bicycles; (ii) 4 km of upgraded highway from the existing road between Nalka and Hatikamrul; (iii) 12 new bridges with a total length of 965 meters on bored pile foundation with cast-in-situ bridge decks on pre-cast, post tensioned concrete girders; (iv) 86 large box culverts of single and multiple barrel layout with a combined barrel length of 714 meters; (v) introduction of O&M concession for a toll

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road section and a toll plaza equipped with an electronic tolling system; (vi) O&M contracts for selected road corridors; (vii) slope protection of a high embankment to prevent erosion; (viii) road safety audit and implementation of effective countermeasures; and (ix) a road safety awareness campaign.

4.2.4 Dhaka-Sylhet (D-S) Road. This component of the project was carried out in two phases, with three contracts in each phase. The construction commenced in June 1999 and the final construction activities completed on April 15, 2005. The 224 km road project was comprised of: (i) rehabilitation or widening of about 154 km of existing highway; (ii) construction of a new alignment (Auskandi-Jagadishpur section) with a length of 69 km; (iii) a new toll road section; (iv) 38 bridges, two vehicle underpasses, and three pedestrian underpasses; (v) provision of 18.5 km service roads on some sections of the road for local low-speed traffic; (vi) road safety audit and implementation of effective countermeasures; and (vii) road safety awareness campaigns.

4.2.5 Rehabilitation of FRA. A total 415 km of 21 FRA improvements were included in the project and all activities were allocated among 26 different contracts. All contracts (with the exception of the two small contracts mentioned above in 4.2.2) were completed satisfactorily by the end of June 2005. As a result, a significant portion of feeder roads network (386 km) was improved.

4.2.6 Periodic maintenance. Despite delays due to lack of experience of contract management by some local contractors, 19 contracts were completed with satisfactory quality of work, which covered periodic maintenance (e.g., resurfacing or overlay) for 628 km of roads.

4.2.7 Road Safety Improvement Program. Most elements of the consolidated program were completed satisfactorily by June 30, 2005. The Community Road Safety Awareness Campaign designed and implemented under the project at the following locations: (i) accident blackspot sites; (ii) the new N-B road; and (iii) the rehabilitation of the D-S road corridors has been successful. An animated film on road safety targeting children and produced in cooperation with international and local NGOs, was widely received after it was broadcasted in local language through a national TV channel. All activities to install traffic signs and road markings for RRMP II roads were completed. Among 41 accident black spots identified, 33 were removed. The remaining eight could not be physically removed due to constraints in acquiring associated land and structures. Acquisition and installation of axle load control equipment however was only partially completed. Among 15 axle load control bridges to be installed, six bridges have been tendered, and two were installed and in operation by EOP.

2000 Flood Rehabilitation Component4.2.8 The implementation of this sub-component is rated satisfactory. All five contracts for restoration of road networks damaged due to floods in late 2000 were awarded in November 2002 and completed by April 2004. About 214 km of national roads and a 40m long single span bridge were restored through this program.

Technical Assistance4.2.9 The implementation of the technical assistance is rated moderately satisfactory. Most of the intended outputs were produced, but the results are mixed.

4.2.10 Institutional development component (IDC3 and CIDC3). A number of studies were carried out under the IDC3, but majority of the outputs were not fully achieved by the closing date of the IDC3. The intended outputs of the CIDC3 have been largely achieved, although mostly later than the original targeted dates. The interim restructuring of RHD has been implemented, e.g., the HDM cell, road safety

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cell, environment & resettlement cell, and MIS and Estate unit have been established and are now operational, but conversion of 63 regular posts created for these units have not yet been approved. Furthermore, the field reorganization (at regional, district, and zone levels) has not yet been completed. Comprehensive Management Manuals have been completed but they are not yet widely used. The roll-out of the Central Monitoring System (CMS) is on-going. Most of the proposed modules for field training are completed and the training is being conducted in all zones. The Integrated Multi-Modal Transport Policy (IMTP) has been prepared but not yet approved. The National Land Transport Policy (NLTP) has been approved and adopted by the Cabinet.

4.2.11 Policy support. The study on Axle Load Control Management and the study for the Rationalization of RHD’s Plant, Equipment and Ferry Operations were completed by the end of the project, but the recommendations of the two studies have not yet been implemented.

4.2.12 Providing necessary technical assistance to strengthen the National Traffic Police Training Center. This sub-component (B3) and the purchase of equipment for the proposed National Traffic Police Training Center (part of the components A6 and A7) were not implemented. Instead, a study for introducing a new Highway Patrol in Bangladesh (BHP) was carried out. The study report was submitted to MoC on March 6, 2005, which suggested the creation of the BHP and three alternative organizational structures for BHP. In June 2005, a Highway Patrol Unit was established and put into force by GoB, although it did not fully follow the suggestions made by the study.

4.2.13 Preparation for the follow-up project. Five consultancy services for the preparation of the follow-up project, the proposed Road Sector Reform Project (RSRP), are being carried out with funding from the RRMP-III credit. But due to delays in carrying out these studies and other issues in project preparation, the appraisal of the RSRP has been postponed. 4.2.14 Training of project staff. A training policy for RHD has been formulated, but most of the training activities as occurred in RHD were not fully in accordance with this policy. Through funding provided by DFID, approximately 25 young RHD engineers were sent to graduate schools in the UK to study pavement engineering, geographical information systems (GIS), MIS, construction management, and maintenance management. However, only few of them were assigned to relevant technical RHD units where their new qualifications filled a specific need and later became key technical staff in RHD, the rest were moved around RHD without particular consideration to their training background. Furthermore, although under different consultancy components of RRMP-III, a number of international or local training programs were provided to several groups of RHD and MoC officials, there is no documentation and evaluation to demonstrate that any intended outcome in capacity building has been achieved.

Land Acquisition and Resettlement4.2.15 The implementation of the land acquisition and resettlement program is rated moderately unsatisfactory, because of initial delays and problems with performance of the implementing NGOs and district land administrations. IDA had to suspend disbursements for about 2 months in mid-2002 in order to resolve the problem of delays in distributing compensation for resettlement.

4.2.16 While the number of project-affected persons (PAPs) was large (32,310 households in total), most of them lost small amounts of land which they occupied (with an average of 0.026 ha per household) because most of the land acquired for the project was in narrow strips along the existing alignments. Compensation for land and other losses was paid in two parts: compensation-under-law (CUL) by the district land administrations, and the "Top-up" allocations by RHD, the latter being an additional

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compensation in order to meet the full replacement costs and other entitlements (e.g., livehood rehabilitation and assistance for squatters) required by IDA resettlement policy. As of November 15, 2005, 95.7 percent of the PAPs had received CUL and 99 percent had received Top-up payments. Among the unpaid cases, the majority involved land belonging to the Land Ministry and other GoB agencies, where no private citizens were involved. Other cases involved those due to various legal difficulties rooted in the country’s land administration system. Some of these have been taken to court and may take a long time to resolve. Funds for the unpaid cases will remain with district commissioners (DCs) and would be disbursed per court decision.

Environmental Management4.2.17 Preparation and implementation of the EIAs and EMPs were satisfactory. Environmental mitigation measures proposed in the EMPs were integrated to the design and implementation of each investment component. For example, on the new N-H-B road component, a Hydraulic Modeling Study was carried out to assess the impact of the embankment construction on the flow of flood water. A number of bridges and culvert openings were added to the contruction to allow adequate flow, to reduce water velocity to an acceptable level, and to minimize erosion. However, the ICR finds two major weaknesses in the EIA/EMP process: (i) there was no solid evidence which can demonstrate that effective public consultations were carried out during the EIA process; (ii) despite the regular submission of the EMP progress reports, there was no systematic documentation of monitoring results, which made it difficult to assess the actual environmental impacts of the project and the extent to which these impacts have been adequately addressed through implementation of EMPs.

Procurement4.2.18 Procurement activities related to the project were moderately satisfactory. No major procurement problems, such as misprocurement, fraud, or corruption, have been found. However implementation of some major contracts experienced delays in procurement, which were mainly caused by the prolonged evaluation and approval process. In some cases, there was a more than nine month gap between the advertisement and awarding of contracts. As a result, some contracts were not awarded immediately after the end of the monsoon season, and the contractors could not fully utilize the construction season as planned or missed the contruction season at all. But nevertheless, 41 works packages out of 49 have been completed, and the remaining contracts could not be implemented because of termination due to non-performance, or being taken over by GoB own funding or by other proejcts.

4.3 Net Present Value/Economic rate of return:4.3.1 The Borrower performed an ex-post economic evaluation of the RRMP-III project, using a methodology and assumptions similar to those used at the time of appraisal. The evaluation focuses on the civil works component of the project, which comprises 82 percent of the total project cost. The most recent version of the Highway Development and Management Model (HDM-4) was used to simulate highway life cycle and vehicle operating conditions and costs for multiple road design and maintenance alternatives. The institutional component, while critical to the overall success of the project, was not analyzed in the economic evaluation because of the difficulty in quantifying benefits from institutional improvements and its impact on the performance of the road sector. However, qualitative analysis of the project’s institutional development impact is given in various sections in the ICR (e.g., section 4.1, 4.2 and 4.5.). A summary of the ex-post economic evaluation is presented in Annex 3.

4.3.2 As shown in Table 1 below, the ERR at ICR stage ranges from 41 percent for the N-H new road construction to 128 percent for the periodic maintenance of national and regional highways. All ERR values at ICR stage are higher than those estimated at appraisal. This is because of higher than expected traffic volume for all project roads and lower than expected unit costs for roads under the new construction

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and rehabilitation components. The sensitivity analysis conducted also shows that the project will remain economically viable under different risk scenarios that could reduce potential economic benefits.

Table 1 Summary of Results of Economic Analysis (Appraisal and ICR Values)

Components Length (km) NPV (US$ million ) ERR (%)Appraisal ICR Appraisal ICR

N-H Road New Construction 55.0 812.0 397.42 15.0 41.00D-S Road Rehabilitation 223.6 4,147.0 13,154.6 30.0 54.0Improvement of Feeder

Roads385.7 2,002.0 2,205.9 27.0 49.0

Periodic Maintenance 627.7 4,218.0 13,159.9 75.0 128.0

4.3.3 The main quantified project benefits are savings by road users on vehicle operating costs and time costs. It is expected that, given the deregulated and highly competitive structure of road transport industry in Bangladesh, a large portion of the savings on commercial vehicles costs (which represent 69 percent of motorized, three-wheel and above, traffic composition) will be passed on to producers and consumers of goods transported by road and passenger traffic. The project has helped preserve the road network in an efficient and sustainable manner, that will increase export competitiveness, accelerate export-oriented growth, and contribute to sustainable economic development.

4.4 Financial rate of return:Not applicable.

4.5 Institutional development impact:4.5.1 The institutional development impact of this project was modest. As discussed in para.4.1.5, the project has made some limited, but notable, impacts in terms of increased technical capacity within RHD to plan, manage, and implement road investment projects, and to maintain the road network. The project also contributed to increased capacity of the entire road sector by introducing some innovative mechanisms, such as, toll roads, private sector participation in road maintenance, road safety audit, highway patrol, the concept of corridor management, and road safety awareness campaigns.

4.5.2 However, compared to the extensive time-frame and considerable total funding of institutional development assistance to date, only limited impacts of a wider institutional development nature has been achieved in RHD. The TA and IDC activities (IDC3 and CIDC3) have not had significantly positive impacts on accountability and governance problems in RHD, regarded by some GoB over-sight departments and concerned development partners as being widespread and at critical levels. In relation to Accounting, Project Management, Monitoring, MIS, IT and Training, the TA and IDC activities have concentrated on generate tools and studies to address specific project-driven needs, and have not yet focused on RHD-wide application of effective new tools and processes for wider accountability and governance purposes. There is little evidence that the new capacities enabled by TA and IDC activities have been proactively and substantially integrated by RHD by its mainstream functions, structure and GoB funded budget.

4.5.3 Activities which are related to policy and institutional reforms, e.g., re-organization of the management framework in RHD, attracted only limited genuine RHD "ownership," in terms of active organizational commitment, resource allocation, and operational assimilation relative to other interests and priorities. For example, the TA and IDC activities have not directly addressed structural issues within the MoC and RHD, such as modernization of delegated powers, authority and responsibility for agency management, both from GoB to the head of RHD and further within the RHD, and initiation of agency and

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staff performance management policies, etc.

4.5.4 In several of the new RHD core functions promoted under RRMP-III, consultant resources with external funding remain crucial to the ongoing viability of their functions and operations - this is particularly sensitive in the department's budget and financial management functions. Without external resources and expertise, the limited institutional development impact of the project may not be sustainable, e.g., tools and systems developed with assistance from the project may not be used effectively, and further reforms proposed by CIDC3 may not be properly implemented.

5. Major Factors Affecting Implementation and Outcome

5.1 Factors outside the control of government or implementing agency:5.1.1 Weather and geographic constraints. Due to weather conditions, the construction period in most areas of Bangladesh is generally only five to six months per year. The unprecedented floods in 2000 and 2004 caused extensive damage to the primary road network and about 150 working days for completing road rehabilitation works under RRMP III project were lost. In addition, prolonged rainy seasons had adverse impacts on the rehabilitation works including the construction of embankments that required the transport of fill material from surrounding areas. Access to these areas was restricted due to wet soil conditions that could not support heavy construction trucks needed for transport of the fill material for the embankments.

5.1.2 The confrontational nature of politics. It has been recorded that there were in total 124 days of general strikes (known as hartels in Bangladesh) during the period from September 1998 to February 2005, which had significant effect on the civil works of the project, and some disruption to other project activities, such as meetings, delivery, transport, etc.

5.1.3 Difficulties in managing co-financed operations. The implementation and outcome of the institutional development component were also affected by difficulties that can be found in other co-financed operations: (i) inconsistent application of the project-wide implementation monitoring framework against common outputs and outcomes, (iii) lack of ownership of the project by the beneficiary; and (ii) weak commitment to rigorous outcome-based performance monitoring from the beneficiary. Furthermore, as the component was mainly designed through bilateral discussions between DFID and GoB (as mentioned in Section 3 and 4), the IDA supervision team which was short of an institutional development specialist tended to rely on DFID to supervise the component, while DFID tended to utilize IDA supervision to ensure the quality of the consultants' work. As a matter of fact, the interactions among RHD, IDA and DFID were often facilitated and intermediated by the IDC3/CIDC3 consultants who prepared all briefs and progress reports and self-supervised their own work. Such interactions, which could hardly dismiss the influence of the consultants' commercial interests, therefore did not generate great amount of direct and unbiased communication on institutional development matters and progress of IDC3/CIDC3 activities. For example, progress reports provided by the IDC3/CIDC3 consultants were often directly used by IDA and DFID supervision teams who thought the consultants' reports had been cleared by the other one. Closer examination carried out by DFID in 2004 and IDA in 2005 found that much of the earlier IDC progress reporting was not factually correct, and it had not been based on sensible levels of systematic and disciplined monitoring.

5.2 Factors generally subject to government control:5.2.1 Procurement. Delays in evaluation and approval process were mainly due to the following practices in RHD: (i) review of bid evaluation reports by another committee or team (other than the bid evaluation committee) when these reports required approval of the Chief Engineer (CE) or higher level

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officials for approval; (ii) mechanistic evaluation of short-listing and consultancy proposals which tends to assign points by too many very restricted criteria which were not in conformity with the practice in the consultancy industry; and (iii) lack of mandate time limits for each stage in the evaluation and approval process. The PPR 2003 (Public Procurement Regulation issued by GoB in 2003) which in principal is along the lines of international practices, has mandated change to the above practices, but RHD has not yet strictly followed the regulation and its provisions. Although no major procurement problems such as misprocurement, fraud, or corruption were found at the time in the procurement activities related to the RRMP-III, more recent experience with RHD has revealed weaknesses in its procurement practices. In particular, some major procurement problems have recently been found, and being followed-up, in road contracts which were managed by RHD under an IDA funded Emergency Flood Rehabilitation Program.

5.2.2 Contract Management by Contractors. Poor performance by some local contractors for the FRA contracts and periodic maintenance contracts was due to lack of experience of organizational and financial management aspects of the contracts. Non-availability of experienced key personnel, skilled equipment operators, and inadequate provision of plant and equipment also had adverse effects on the performance of the contractors. Stricter scrutiny of contractor’s capacity will be necessary in the future to ensure that only capable contractors are pre-qualified.

5.2.3 Land acquisition and resettlement. Implementation of the project experienced several delays caused by the inherent problems in the country's land administration system, and the procedures and practices in using the present Land Acquisition Ordinance, such as inconsistency and lack of uniformity in data management, improper procedures for determining market rates for structures and other assets, valuation of assets, and procedures for compensation payment. Additionally, the two consulting NGOs were not only inefficient in program and data management, but also involved in questionable practices with the PAPs.

5.3 Factors generally subject to implementing agency control:5.3.1 Pre-qualification of Contractors for the FRA component. Although normal procedures were followed by the Borrower in pre-qualification of the contractors for the 3-Year FRA program, the past experience of some of the contractors as well as equipment availability and financial capacity were not scrutinized with due diligence. As a result, some contractors failed to execute the works and the contracts had to be terminated.

5.3.2 Issues of Joint Ventures (JV). The formation of JV under the project, either with local or foreign firms, was found to be for ‘beating the system’ rather than completing contracts within the specified time period. Most foreign contractors showed little interest after contracts were awarded and took a back seat during implementation. In some cases, the activities were divided between the two contractors who then worked independently, exacerbating delays. In two cases, contracts were terminated due to poor performance by JV partners. Situations also arose when the local partner received the mobilization advance, but did not share the funds with their foreign partner which sometimes resulted in cash flow problems for the contractor who had to bring plant, equipment, and certain construction materials from overseas.

5.4 Costs and financing:5.4.1 At appraisal the total project cost was estimated at US$528.5 million, of which IDA share was US$ 273.2 million equivalent (52 % of the total project cost). The civil works at appraisal accounted for US$441.5 million (83.5 % of the total project cost), whereas the procurement of equipment accounted for US$ 8.5 million (1.6 %), the consulting services US$ 41.6 million (7.9 %), and the land acquisition and resettlement US$ 37.0 million (7.0%). There was no change in project cost estimation at the MTR (see

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Annex 2: Project Costs and Financing).

5.4.2 At project closing, the total project cost was estimated at $468.06 million, of which IDA share was US$ 228.84 million. The cost for civil works (including the 2000 Flood Restoration Component) was US$ 383.38 million (81.9%), the procurement of equipment was US$ 2.32 million (0.5 %), the conculting services was US$ 44.56 million (9.5 %), and the land acquisition and resettlement was US$ 37.8 million (8.1%). Compared to cost estimate at appraisal, the cost for all civil works and equipment was reduced while the cost for the consulting services and the land acquisition was slightly increased. The total project cost by end of project was estimated to be US$ 60.50 million (11.4 %) less than the cost estimate at appraisal. The reduction in total project cost was mainly contributed by (i) cancellation of purchasing some equipment which was worth about $6.0 million; (ii) cancellation of about US$30 million from the Credit due to dramatic changes in exchange rates since the Credit was negotiated; and (iii) the reduction in unit cost for most of the road works (see Annex 3: Economic Costs and Benefits.)

6. Sustainability

6.1 Rationale for sustainability rating:6.1.1 Sustainability is rated moderately likely for the following reasons:

The government has not yet demonstrated strong commitment to, and application of, a long-term lstrategy for improving road sector management and its governance framework; There has been shared appreciation of the importance of road maintenance, improvement of feeder lroads, and road safety by some governmental officials, but substantial road sector reforms need to be carried out by the government to create an enabling policy and institutional environment for sustainable improvement in road maintenance and road safety; The IDC/CIDC3 component of the project, co-financed by DFID, improved technical capacities at lRHD/MoC to design, manage, implement, and maintain road investment projects, but the component remains dependent on externally-funded consultancy services with limited emerging RHD "ownership." The component therefore achieved only limited results of a wider institutional development nature;Despite efforts made through the project on road maintenance, GoB has not yet fundamentally laddressed the root causes of the poor road maintenance in the country, such as (i) insufficient funds for maintenance; (ii) increasing overloaded truck traffic; (iii) absence of adequate technical and financial audits; and (iv) political interference in inefficient allocation of limited resource for prioritized projects.

6.2 Transition arrangement to regular operations:6.2.1 This is the third IDA-funded road sector project with RHD. Most of physical works funded by the project were already integrated into the regular operation of the department, which has minimized the need for special transition arrangements. Additionally, it is worth noting that the first toll road with O&M concession in Bangladesh was established through the project, which outsourced road maintenance to the private sector.

6.2.2 However, despite the insistence of both IDA and DFID, the request for conversion of 63 regular posts still have not yet been approved by GoB. Given that DFID will complete its support to CIDC-3 in March 2006, appropriate arrangements (including adequate resources) have yet to be made by GoB to continue implementing and operating the outputs of CIDC-3 beyond March 2006.

7. Bank and Borrower Performance

Bank7.1 Lending:

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7.1.1 Identification of the project was satisfactory. The Task Team ensured that the project objectives were consistent with the Government and IDA strategies. IDA assigned a qualified team to the project with the appropriate skill mix and country knowledge to deliver a well designed project, focusing on the sector’s highest priorities including maintenance of the existing road network, road safety, feeder roads, and institutional capacity of RHD in road maintenance and financial management. The close cooperation in project preparation permitted transfer of technical knowledge to the Bangladesh counterparts.

7.1.2 IDA’s assistance to project preparation was satisfactory. From the previous two road projects, it was learned that the poor quality of projects at entry and weak institutional capacity resulted in project management and administration being the weakest areas for implementing road projects in the country. For RRMP III the Task Team incorporated the following specific measures in the design and implementation of the project, including: (i) preparation, review, and agreement of engineering, social, environmental, and institutional aspects of the project with the client prior to implementation; (ii) strengthening of basic institutional capacity for effective project management implemented early in the life of the project (i.e., a small-scale reorganization of RHD and the establishment of a highway maintenance unit in RHD and an Office of Project Director (OPD) as conditions of negotiations, and appointment of experts in engineering, finance, social, and environment, as well as appointment of all supervision consultants); (iii) strengthening of procurement capacity to handle the first year's contracts prior to credit approval; and (iv) establishment of a Project Steering Committee (PSC) consisting of high-level officials from all GoB organizations related to the project to ensure inter-agency coordination. However, the results/outcome monitoring framework was weak in the project design.

7.1.3 The PAD assessment of implementing agency capacity was adequate. The economic analysis indicated that the proposed road improvements and periodic maintenance would be feasible. The project’s main risks and benefits were identified correctly. IDA had a consistently good working relationship with the borrower during project preparation and appraisal. However, there were some weaknesses in IDA's appraisal of the project as summarized in 3.5.2, in particular, the PAD assessment of the Government's commitment to institutional and policy reforms was inadequate. The rating for the appraisal of the project is moderately satisfactory.

7.2 Supervision:7.2.1 The IDA's supervision of the physical investments component was satisfactory. It benefited from the almost same team as in preparation over the period of the project implementation. This arrangement contributed to consistent approaches to road sector issues, procurement, safeguards, and disbursement. The task team worked closely with RHD and provided extensive assistance and technical guidance. Other key contributions from the Bank supervision team were in the areas of promoting and implementing innovative concepts in Bangladesh such as toll roads, community-based road safety campaigns, separated rickshaw lanes, a highway patrol, and attention to proper road maintenance. During supervision, the IDA team took appropriate and prompt actions after it found some outstanding resettlement issues and helped resolve them, but the absence of environmental specialist in some supervision missions severely affected monitoring of the implementation of the EIAs and EMPs. In addition, there were weaknesses in monitoring and updating outcome indicators.

7.2.2 The IDA's supervision of the institutional development component (IDC3 and CIDC3) was moderately unsatisfactory because of the following weakness: (i) the component was not well defined at the time of appraisal and was often overlooked by the IDA team as the component was co-funded by DFID; (ii) lack of an institutional specialist in the supervision team significantly constrained the team's ability to practise critical quality control over IDC consultants' works; (iii) acceptance of inadequate interactions with DFID and RHD that were strongly influenced by progress reports or briefs produced by the IDC

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consultants themselves; and (iv) IDA team did not proactively join DFID's efforts to address institutional development matters and did not create a candid and productive collaboration (other than just information sharing) with local DFID representatives.

7.3 Overall Bank performance:7.3.1 The Bank’s overall performance is rated as moderately satisfactory.

Borrower7.4 Preparation:7.4.1 The Borrower's performance in lending is assessed as satisfactory. The project was prepared directly following up on the successful implementation of two previous road rehabilitation projects in Bangladesh. There was very close cooperation at the time of preparation between the Government and the Bank. The leadership and vision provided by the main counterpart in RHD ensured that the project that was developed was appropriate to the needs of Bangladesh. Representatives from all the counterpart agencies were involved in the preparation of the loan.

7.5 Government implementation performance:7.5.1 The Government's implementation performance is assessed as satisfactory based on the assessment of achievement of the project as outlined in Section 4. Nearly all the key conditions of the loan were fulfilled. The Government delivered by allocating adequate authority and resources to project counterparts who were able to deliver the project. However, support from the government to the institutional development aspects of the project was weak. For example, the issue of conversion of 63 regular posts before closure of the DFID funding has not yet been resolved. Furthermore, parallel reforms to effectively tackle with structural issues such as management performance, staff motivation, executive leadership, etc., have not yet been carried out promptly.

7.6 Implementing Agency:7.6.1 The performance of the Implementing Agency, who had satisfactorily implemented the previous two road sector projects, is assessed as moderately satisfactory. While there were some delays mainly due to devastating floods and resettlement issues, the implementation of the project was generally smooth and acceptable, and key intended outputs were produced by end of project (EOP). But there were remaining areas of significant concern, i.e., inadequate compliance in introducing and adhering to the key provisions of the GoB's Public Procurement Regulations (PPR). Disbursement of the Creidt was suspended once, for about two months in mid-2002, due to delay in distributing compensation to PAPs. The delay was mainly caused by the NGOs which were responsible for distributing compensations but did not approprately manage resettlement data, especially in relation to the additional land acquired during the implementation. The issue was quickly resolved after RHD took remedial actions recommended by the IDA team.

7.6.2 In general there was full continuity in staffing of the Project Team. However, changes in senior management (CE) of RHD had adverse effects on decision making regarding contractual matters, the role for which fell under the jurisdiction of the CE designated as the “Engineer.” Furthermore, the RHD did not fully commit to recruiting well qualified non-engineers, such as environmental and social development experts.

7.6.3 RHD did not proactively supervise IDC3/CIDC3 consultants' work and operationalize outputs of the TA and IDC activities. There was also a lack of systematic documentation in the project management, e.g., there was no documentation of public consultations on environmental management plans, which to some extent prevented effective independent audits and external reviews.

7.7 Overall Borrower performance:

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7.7.1 The overall performance of the Government and RHD during RRMP III is rated moderately satisfactory.

8. Lessons Learned

8.1 Future Bank assistance should focus more on improving the institutional framework and governance structure within which the road transport sector is managed and financed. Because road transport investment is the largest capital expenditure in the country, governance issues in the sector take on added importance. The poor governance structure, high transaction costs, and protracted delays during procurement and implementation of works all contribute to the high overall cost of road construction in Bangladesh, one of the most expensive in the region. Governance problems also affect the planning and budgeting of road investment, as well as the performance of sector staff. Supporting procurement reform and improving competitive contracting procedures for maintenance are likely to increase the transparency of road works procurement. Other reforms aimed at instituting a transparent planning and budget allocation process, and at commercializing or privatizing RHD's non-core activities will also help improve the overall governance environment in the road sector.

8.2 Successful implementation of institutional and policy reforms in the road transport sector requires more than capacity building. It also requires (i) strong and sustained commitment for reforms by senior policy makers of the government; (ii) full coordination and reinforcement from key donors; (iii) use of consultants with local knowledge to assist with the implementation of complex reforms; (iv) meaningful consultation with the public; (v) clear defined objectives or outcomes of the reforms, effective project incentives, leverage and/or associated credit conditionality; and (vi) adequate supervision, monitoring, and evaluation.

8.3 Parallel reforms in GoB public administration are also important. Most of the current management and governance concerns at RHD reportedly also exist in other GoB agencies. Accordingly, alongside sectoral interventions, the Bank and other donors' dialogue with GoB should pursue development of more strategic parallel reforms in GoB public administration, aimed at an enhanced framework for agencies to deliver effective performance management, substantive accountability, and improved executive leadership and staff motivation. Without such reforms, RHD and similar agencies will not respond adequately to sectoral policy and process changes. However, given the confrontational political context in the country, such public administration reforms need to be delinked from politicians and focus on professional aspects of the public servants system.

8.4 Future Bank operations should also focus more on real outcomes rather than inputs or outputs. Design of the new operations need to address issues such as (i) specificity of outcome level performance indicators and appropriateness of the mechanisms for measuring these indicators; (ii) incentive structures in the government and implementing agencies for outcome monitoring; (iii) accountability of implementing agencies in terms of outcomes; (iv) technical know-how for developing and operationalizing outcomes-level monitoring systems; and (v) coordination with other donors on outcome monitoring.

8.5 RHD's public procurement processes need significant improvement to ensure transparency and accountability. Compliance by RHD in introducing and adhering to the key provisions of the GoB's PPRs are still inadequate. For example, (a) the abolition of the Chief Engineer’s Procurement Scrutiny Committee to review the bid evaluation committee reports for contracts prior to being approved by the Chief Engineer is still not realized; (b) the continued non-submission of bid evaluation reports directly to the contract approving authority, without any in-between reviews; (c) delays in the clearing of procurement

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cases at various levels within RHD/MoC without regard to the government mandated procedures; and (d) non-delegation of improved financial powers at decentralized levels. These significant deviations may provide "multiple rent seeking" opportunities, and cause inordinate delays in completing the procurement process for IDA and other donor-assisted projects. To prevent corruption in future operations with RHD, IDA teams need to work with GoB and other donors to (i) strengthen fiduciary safeguards and improve governance practices in RHD and MoC in advance of any proposed project, (ii) identify risk mitigation measures which will subsequently be built into the project implementation arrangements and the financial management framework, (iii) follow the Procurement Approval Timetable/Flowchart given in Annex A to the Bangladesh Public Procurement Processing and Approval Procedure (PPPAP, October 11, 2004), and (iv) in accordance with PPPAP, appoint two procurement experts from independent reputed institutions as external members in evaluation committees.

8.6 The independent "Engineer" role separated from the "Employer" should be mandatory in road sector projects which normally involve a large amount of civil works. Despite IDA's push during the project implementation, consultants acted only as the "Engineer's representative" while RHD was both the "Employer" and the "Engineer." This practice severely undermined the independence of the "Engineer" which is the cornerstone of the International Federation of Consulting Engineers' (FIDIC) procedures and also affected the transparency of contract administration. In fact, by restricting international consultants from exercising their independent rights, GoB is not fully utilizing the consultants' services in spite of paying a huge fees for their services. For new projects in the transport sector, Consultant should perform the role of "Engineer" with all obligations including quality and certification.

9. Partner Comments

(a) Borrower/implementing agency:

Comments by the Roads and Highways Department, Ministry of Communications, Government of Bangladesh

I Introduction

1.1 RRMP-III is the third of the series of IDA-assisted Road Rehabilitation and Maintenance Projects designed for capacity building of the Bangladesh Roads and Highways Department (RHD) through network improvements and institutional uprages. The project commenced in 1999 and was completed in 2005 with an estimated cost of US$ 424.69 million. The time period for the project appears long, but in the context of Bangladesh, this is normal due to the difficult geographical locations and persistance of natural calamities such as floods as well as the comprehensive nature of the project objectives.

1.2 To achieve faster economic progress through the effective use of the newly constructed Jamuna Multipurpose Bridge, this project undertook a major program to upgrade the national road network. To ensure more balanced development throughout Bangladesh, a major component of the project focused on the road network in the less developed western part of the country. The project commenced in 1999 and completed in 2005.

1.3 The following sections describe borrower’s (including RHD and GoB) observations and evaluations about the project upon its successful completion.

II Project Description

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2.1 The objective of the project as stated in the Project Proforma was to reduce the overall cost of road transport in Bangladesh. This objective was envisioned to be achieved through:

Providing and improving critical road links to address "bottlenecks" in the arterial road network of lthe country by - (a) constructing the new Nalka-Hatikamrul-Nalka road link, (b) rehabilitating the Dhaka-Sylhet Highway, (c) improving selected FRAs, and (d) strengthening and preserving selected National and Regional Highways with substantial periodic maintenance activities. Improving the institutional capacity of RHD for road asset management, preservation, and lfinancial management.

2.2 Physical works in this project include:

New Construction of 120 km of new national highway. This includes the 51 km lHatikamrul-Bonpara section of the Nalka-Hatikamrul-Bonpara road and 69 km of the Auskandi-Jagadishpur section of the Dhaka-Sylhet road. Rehabilitation of a 161 km section of the 225 km Dhaka-Sylhet road including improved lgeometry, straightening, bypasses, new and improved drainage structures, and 10 year design life pavement on embankment that has been raised above high flood level.Improvement of 20 FRAs with a total length of 400 km in the western half of the country. The lroads have been provided with 10 years design life pavement, hard shoulder, and reconstructed bridges and culverts at selected points.Periodic Maintenance to extend the service life of 18 national and regional highways in the lwestern part of the country that were constructed or reconstructed under previous projects. The total length covered is 627 km. Road Safety programs to improve the safety situation at the country 30 nos. black spots have been limproved in the western part of the country through widening, channelization, road marking, traffic sign installation and bus-bay construction. Traffic sign and thermoplastic road marking has also been provided on 1534.00 km roads in that part of the country.Axle Load Control Stations at three strategic locations were built to control road damage caused lby over-loaded truck traffic. The stations are located in Auskandi on Dhaka-Sylhet road, Sitakunda on Dhaka-Chittagong road, and Manikgonj on Dhaka-Aricha highway. The latter two are fully financed by GoB and to be completed in December 2005. The Auskandi station was completed in March 2005.

III Project Preparation and Implementation

3.1 Project Design. The RRMP-III, was designed considering the following sector issues and government strategies:

Implementation of GoB’s 1991 Road Master Plan (RMP) for the National and Regional road lnetwork. This includes (a) construction of the 55 km long Nalka-Hatikamrul-Bonpara Highway, and (b) rehabilitation of the 225 km long Dhaka-Sylhet road.Improvement of agriculture based national economy by providing access to Thana Head Quarters l(Police Station) and important growth centers. This includes improvement of 400 km of FRAs.Institutional capacity development of RHD in road asset preservation. This includes creation of lrelated units in RHD and training of RHD engineers through the DFID-financed IDC and undertaking periodic maintenance programs for 627 km of selected national and regional highways.Creation of a Financial Management Cell in RRMP-III for the improvement of financial l

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management in RHD commensurate with the large investments and reorganization activities going in the department. Improvement of road safety, traffic management and axle load control situation in Bangladesh. lThis includes creation of a National Road Safety Council and formulation of a National Road Safety Strategy. A comprehensive axle load control program has also been prepared.

3.2 Project Appraisal. The appraisal of the project took place in June 1998. RRMP-III is a sector development project of RHD. In this context, the inclusion of above objectives and their implementation have been found appropriate for the improvement of the national road network and associated institutional capacity enhancements. The PAD detailed the project objectives and scope of work described above in the Project Design section. There was no major departure in the scope of work during implementation of the project except traffic management and axle load control works. Due to some local constraints, the scope of these works was reduced. However, they are reflected through the creation of the Highway Patrol Police and construction of 20 Axle Load Control Stations from GoB funding.

3.3 Project Implementation. The project has been implemented quite satisfactorily, though delayed by one year due to three major floods during the project period. The 1998 flood required changes in input data for the design of roads and structures, which delayed the start of the project. The 2000 and 2004 floods hindered project progress, by causing work stoppages, demobilization and remobilization, rehabilitation of damaged sections, and extended protective works. All the contracts (with the exception of two terminated FRA contracts) have been completed as per original scope of work. The project found poor performance by a few contractors, which delayed overall project completion. However, the significant development of local road industry has been achieved through this project and reflected through the awarding of 35 nos. contracts to local and JV contractors out of total of 40 nos. contracts.

3.4 The procurement of feasibility study and design consultants for this project were done under the follow-up component of the previous IDA funded project, RRMP-II. This helped facilitate the early start of some of the project works and provided project management with a distributed workload over the project period. The performance of the consultants was satisfactory with the exception of some changes to their key staffing during the work implementation.

3.5 Project Management. The project management was carried out by RHD engineers with necessary support from consultants. The Project Management Unit - Office of Project Director (OPD) was headed by an Additional Chief Engineer of RHD, who was supported by two Superintendant Engineers and eight Executive Engineers with their supporting professional staff. The periodic maintenance and feeder road components were implemented by local RHD units and field engineers. Three local technical advisors were appointed to support the PMU on management, resettlement, and financial issues, but they failed to provide significant inputs into project management.

IV Project Results

4.1 RHD's own assessment showed that the objectives of the project were achieved in most cases despite constraints regarding repeated force majeure, delay due to design review, absence of commitment of some contractors, and shortage of counterpart GoB funding. The project outcomes are described below under different sub-headings:

4.2 Physical Works. Most of the road works except a few kilometers of FRA have been completed satisfactorily. A post construction economic analysis of the road works by RHD using HDM-4 shows that all the works taken under the project are economically viable with EIRR ranges from 18 percent to 198

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percent, which are higher than the values mentioned in the PAD.

4.3 Besides economic and social aspects, travel time has been reduced considerably throughout the country due to improvement of a big portion of the national road network. As a result, vehicle-operating cost has been reduced by 16 percent. Massive road safety works through black spots development, road furniture works and awareness campaigns have helped keep road casualty levels in check despite increased mobility on a larger network.

4.4 In 2000 flood considerable section of the RHD road network was damaged and the 'Flood Damaged Rehabilitation Project of 2000' was undertaken from from 2001-2004 as part of the IDA credit for RRMP-III. A total of 214.40 km road, 40 m bridge, and a 67.9 m box culvert in the Khulna and Rajshahi regions were rehabilitated or reconstructed under this project at a cost of Tk. 456.15 million.

4.5 Institutional Development. Institutional development was an integral part of RRMP-III, which was included to consolidate the achievements during RRMP-I and RRMP-II. DFID was the principal funding agency in this part through the IDC. Under the IDC, RHD was reorganized to strengthen its headquarters functions. Establishment of the HDM circle, MIS circle, Environment circle, Road Safety and Design circle and re-organization of Technical Services and Planning & Maintenance Wings have been completed.

4.6 Under IDC-3, CIDC-3 and different RHD projects several standards and manuals have been introduced by RHD. These include Standard Technical Specifications, Standard Testing Procedures, a Road Safety Engineering Manual, a Road Sign Manual, Maintenance Manual, Pavement Design Manual, and a RHD Management Manual. These have helped to improve the quality of RHD activities. One of the most important achievements has been the preparation and approval of the National Land Transport Policy (NLTP) by the GoB. This policy will ensure balance and appropriate surface transport development in the country.

4.7 Management Plans for different RHD wings in headquarters, in the field, as well as for the Mechanical wing have been prepared and implemented. A Foreign Aided Projects (FAPs) Management Plan for RHD has also been prepared and will be implemented in the coming months. This will enhance RHD's capacity for procuring and implementing projects.

4.8 RHD has been covered by a computer networking system with effective LAN and WAN systems. This made RHD a pioneer among GoB organizations for incorporating e-governance. A network-based Central Monitoring System (CMS) has also been introduced to modernize RHD’s monitoring activities.

4.9 Under RRMP-III funding of a trial pavement construction program was undertaken in BRRL. This has helped facilitate the development of the Standard Technical Specifications for RHD. The trial findings show that brick aggregates and stone aggregates can be used at various ratios for pavement base and sub-base construction. Introduction of these findings have helped to reduce the standard RHD rates for the base and sub-base construction by about 20 percent.

4.10 Road Safety. Road safety was an important component of the RRMP-III. A total of 30 nos. black spots were improved in the western part of the country through widening, channelization, road marking, traffic sign installation, and bus-bay construction. Traffic sign and thermoplastic road marking were provided on 1,534.00 km roads in that part of the country. Under this component, a Road Safety Engineering Manual was also developed for RHD.

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4.11 Road safety awareness campaigns were undertaken in the Dhaka-Sylhet Highway and Jessore-Khulna Highway corridors. Two well known non-profit organizations, BRAC and Sheltech Foundation, were engaged respectively for these programs. Some of the activities under these campaigns included road safety training for road users, introduction of road safety cadets, observation of road safety day, road safety theater, distribution of road safety cassettes, installation of road safety billboards, and distribution of road safety stickers to non-motorized vehicles.

4.12 A road safety animation film has been developed to air on television. Four episodes of the film “Lal, Holud aar Sabuj” have been developed by BRAC under this project. It is expected that private sponsors will help produce more episodes to promote road safety awareness activities in the country.

4.13 The Bangladesh Highway Patrol (BHP) has also been established by GoB, after it was recommended in a RRMP-III study led by highway patrol expert Rohit Baluja, President of Institute of Road Traffic Education, New Delhi.

4.14 Financial Management. To improve the financial management of RHD projects, a Financial Management Cell (FMC) has been created under the RRMP-III. Initially organized to oversee the financial management of IDA-assisted RHD projects, the FMC is expected tol have greater role in the future to consolidate the financial activities of RHD.

4.15 Under FMC, the introduction of computerized systems has helped the organization to obtain comprehensive financial accounting and management information that the manual system is unable to provide. The system provides actual versus budgeted expenditures and generates Schedule of Withdrawal of Proceeds and Statement of Expenditure forms, including all the LACI forms of reporting required for IDA processing of withdrawals from the credit.

4.16 Training. The targets for training activities stated in the Performance Indicators (See Table-1) have been surpassed. Most training in this period has focused on RHD engineers and support staff. As a result, 16 RHD engineers have been post-graduated under DFID funding in Pavement Engineering, GIS, MIS, Construction Management and Maintenance Management. Some of these engineers are providing specialized services in recently created RHD units. Overseas training have also been provided to RHD and MoC officials under other components of RRMP-III.V Sustainability

V Sustainability

5.1 Present activities in RHD to ensure sustainability of the development objectives of RRMP-III include the application of a central management system to promote e-governance; use of RHD Systems and Procedures for the procurement and implementation of RHD works, increased attention to road asset preservation through preventitive maintenance; improved resettlement and environmental measures; and use of new RHD units for network planning, procurement of increasingly mechanized construction, and out-sourcing for the operation and maintenance of big structures.

VI Bank's Performance

6.1 The support from the Bank’s preparation and supervision missions was critical for the successful implementation of the project. The Bank’s missions were comprised of technical experts in all the major project sectors who helped solvw technical bottlenecks in project implementation. Missions were also helpful for ensuring better coordination among various GoB departments regarding project funding, administrative approvals, land acquisition, and resettlement works.

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VII LESSONS LEARNED

7.1 Many of the findings and lessons learned from project preparation, feasibility studies, design and supervision works, land acquisition, resettlement works, and other institution issues will help to ensure improved implementation of future projects. The findings, with specific recommendations, are stated in the following sub-headings:

7.2 Project Preparation. The preparation of projects funded by foreign donors has been difficult for RHD due to absence of any dedicated RHD wing for implementing these types of projects. Though preparation of this project was considered as a follow-up component to RRMP-II, it was nevertheless difficult to engage all necessary manpower from RRMP-II to implement RRMP-II. As a result, engineers from different RHD wings were brought in to assist with the project. Such arrangement cannot ensure timely completion of a procurement plan and lack of necessary procurement training of this group of engineers was had an adverse effect on project preparation.

7.3 This observation is also relevant for the presently under preparation RSRP and other RHD projects supported by other development partners. To overcome this situation a Foreign Aided Project Management Unit needs to be formed. A RHD committee with support from CIDC-3 consultants is now working to propose such a unit and to prepare a manual for the unit. However, it is recommended that this unit should be designed in such a way that the group of engineers to be engaged for the preparation of a project should be properly trained before starting their jobs, and they should continue their service during the implementation of the project to ensure ownership as well as accountability.

7.4 Engineering Issues. Engineering issues are important as most of the project funds goes to engineering construction. Main engineering aspects include:

Feasibility studies lDesign of selected roads & bridges and cost estimateslConstruction of roads and bridgesl

7.5 Feasibility studies are important for selecting the best candidates for scarce resources. Feasibility studies have often faced setbacks in RHD due to the following reasons, which require further attention:

Insufficient coordination in RHD among projects supported by different development partners as lwell as project undertaken by GoB. This often resutls in roads being ignored. For example N7 (Jessore-Khulna) and N8 (Faridpur-Barisal) are not included in any project yet although those require improvements, while widening of some parts of the N3 (Dhaka-Mymensingh) began just months before its improvement under the proposed RSRP. The absence of proper counterparts often leaves consultants helpless as well as unaccountable for ltheir work. In the preparation of the RSRP this has been taken care of, but this needs to be institutionalized for all works in RHD.Absence of adequate secondary data resulted in consultants spending a great deal of time searching land time for data using arbitrary figures, which were often inappropriate for the local conditions. RHD now has got a library, but it is in need of an upgrade with an archive section to preserve past and future project documents. Repetition of feasibility studies for the same road often occure resulting in an inefficeint use of lresources and time. Therefore, the feasibility study component should be coordinated from a single point, or RHD should have a regular program for feasibility studies. This study should be available

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for different projects to select their program in a coordinated approach. This will ensure a speedy and effective network development in RHD.RHD is known as a pioneer of e-governance within the GoB. Major findings of all the feasibility lstudies carried out in RHD can be put in a designated folder for easy access.Important Feasibility study indicators like NPV, IRR, BCR are often confusing, as consultants use ldifferent standards and data sources. As such RHD should develop its own standard for calculating these indicators, and advicate that other related GoB organizations publish essential yearly data for the required parameters.

7.6 The design component of road and bridge works are often delyed for a long time as the consultants simply follow the designs of previous projects. Cost estimates often deviate significantly, which causes problems in contract administration. Major findings include:

Country-specific issues regarding materials and the environment should be considered in the design lof roads and structures. It is very difficult to provide a new concept within the short time frame of the design stage. However, there should be at least a few sections in every project for roads constructed with new design and their evaluation for future reference. The consultants usually create the pavement design by following different design catalogues and lpropose a compromised section in terms of cost and reference to other projects. This is not a modern approach and cannot be acceptable from costly overseas consultants. This approach often leads to under design of upper layers of pavement and over design in the lower layers. Alternative materials are not given any weight at all. Moreover, pavement internal drainage issues are mostly overlooked. For Bangladesh situation the consultants should follow a semi-mechanistic design approach if not a completely mechanistic one. This would allow a balanced design in terms of costs and conditions and the pavement would have a longer expected service life. Overloaded truck traffic is a big problem for the service life of pavement in Bangladesh. A ldifferent design with thicker, stronger upper structural layers in the form of a cement-stabilized base and or thick bituminous course with low penetration bitumen may be tried. Cost of such construction should not be more for requiring lesser thickness of the underlying unbound layers.In many cases, the consultants propose demolition of existing structures in order to widen them. lThese types of suggestions were reviewed in RRMP-III, but in many other projects this is going on. The Terms of Reference for the consultancy service should be written in a way that will encourage other cost-effective solutions.Cost estimates prepared by the consultants were often found inappropriate during implementation, lparticularly for earthwork and embankment protection. Lack of necessary site surveys and absence of far-sightedness often led to this situation. Consultants ensre that these issues are addressed.

7.7 Construction is the most difficult part of the project. In addition to coordination among the client, consultants, and contractors, many other issues emerge for the successful implementation of a project. Some of the observations and recommendations include:

The selection of contractor plays a vital role in the success of timely construction. Therefore, lforeign contractors who do not have experience in working in Bangladesh in the last few years shall only be in JV with a reputed local firm. Because of socioeconomic conditions in a developing countries, a new overseas firm often faces problems launching new ventures in addition to delays in procurement of equipment and manpower. As a result in construction activity at the front end of the project may be hastened putting pressure on local resources and quality control. Incentives must be provided to develop the local construction industry. The current system of lfinancial preference often leads to abnormally low rate quotes by some overseas contractors. This

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ultimately hampers project implementation. To avoid this situation, some of the contract packages of a project may be categorized as specialized or big, only procured through ICB and no financial privilege will be given to local contractors. Weather and geographical conditions in Bangladesh limit the working period for embankment lconstruction to only 3-months and for pavement to only 6-months. This results in long implementation periods and high cost to the contractors. Contractors may be awarded bonuses for early construction by proposing new design or CPM for implementation within the approved contract cost. This would help to develop new ideas and concepts by the contractors that ultimately benefit the country.Constant quality control testing is essential for big contracts. It is often impossible to attend to lmost of the testing work by the RHD representative because of other responsibilites. Therefore, a matrix/methodology for post construction quality control operation may be adopted for RHD engineers to ensure quality work by the contractors. The contractor will do the tests as per specifications. The RHD and consultant's representatives will present in the tests like mix design, pile load tests etc., but for other regular tests they will do post work tests on random sampling to check the accuracy of the contractor's testing. As such the quality control can be ensured even with less input from consultants and the client. Getting skilled technicians and laborers is a major problem in project implementation. To address lthis problem, a special program may be included in every project to provide skills development training to local people working on the project under different contractors. This may also be made compulsory to the contractors at their own cost or the program may be undertaken jointly by the consultant's and the contractor's under the client's auspices. Use of advanced equipment like pavers for laying unbound layers, nuclear densitometer, batch lplant for large scale concrete work, use of necessary additives in bituminous and concrete works need to be encouraged for speeding progress and quality assurance.

7.8 Pre-Construction Issues. Pre-construction activities are important at the early stages of a project, and the following points should be considered:

The local units as well as concerned planning units should be informed immediately of the possible linclusion of a road project to avoid costly construction and maintenance activities on it. Land acquisition is a lengthy process and delays project completion in many cases. Land lacquisition activities may be started just after the completion of the feasibility study. This can be initiated by the local RHD unit if the project is delayed. The government normally completes project componetns with some local resources such as land lacquisition and construction of embankments on a prioritized project. As such if IDA supports only government prioritized projects, the amount for land acquisition would be reduced.A simplified procedure for land acquisition should be formulated to speed up this activity. The limplementing agency may be allowed to proceed with its project on the selected private land after giving adequate time for resettlement if any and the compensation activities can be continued as required.Present trend of diversion or bypass construction should be reviewed to save agricultural land, lhuge resettlement and compensation activities. Widening of roads with necessary service lanes in many bazaar areas may be more practical rather than providing them with bypasses.Resettlement of squatters should be confined to people living below poverty line only. lThe resettlement costs for squatters can be minimized by enacting and enforcing stringent laws lagainst encroachment.

7.9 Other Issues. Institutional development is a hidden agenda in the RRMPs since its inception. This

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is commendable as local forces are often adverse to any change. However, the reforms proposed are often unclear and difficult to achieve. Creation of new wings or even new departments are often found to be additional burdens that provide no new benefits. However, changes made in RHD with the inclusion of the HDM unit, road safety unit, environment & resettlement unit, MIS and Estate unit helped modernization of RHD. But the absence of necessary logistical support for some units (e.g. road safety unit and environment and resettlement unit) limited thie effectiveness. It is recommended to provide necessary logistic support and wide-scale training to relevant RHD staff of all the new units for their proper functioning. Concerned civil works projects may include these provisions.

VIII Conclusion

8.1 The Third Road Rehabilitation and Maintenance Project was a multidimensional project for road sector development, that addressed major disconnects in the construction and rehabilitation of a major corridor, periodic maintenance to 17 nos. of national and regional highways, improvement of 15 nos. feeder roads, improvement of road safety features of 1,566 km of national and regional highways, development of 33 nos. black spots. It also produced a road safety awareness campaign, support for the establishment of the road safety cell, production of a road safety animation film, construction of axle load control stations and toll collection system, maintenance of new road sections under O&M contract, and umbrella cover to the institutional activities of the RHD and MoC. These activities indicate the extent and contribution of the project to the road sector development of the country. Termination of two feeder road contracts was a set back to the project, but the authority had to do it with bank’s concurrence when all the persuasion to the contractor ended with no result. The non-completion of the two contracts has had only a minor effect in comparision to the large scope of the overall project. A devastating flood in 2004 did not produce any extra project costs, while many changes in design and estimates were undertaken to accommodate needed changes but with prudent reviews within contract prices.

8.2 From RHD's point of view, the project can be termed as a success, the administration of which has brought a great deal of experience in project management to RHD, and aid in better project design and implementation in coming years.

(b) Cofinanciers:

Comments by the DFID, Department of International Development, UK

I Introduction

1.1 RRMP III was the third project of a 14 year World Bank/DFID programme in support of better rehabilitation and maintenance of Bangladesh’s major road system. The GoB partner institution was Roads and Highways Department (RHD) in the Ministry of Communications. DFID’s contribution has been in attempting to strengthen RHD’s institutional capacity (CIDC3).

1.2 The following comments attempt to address three issues:the successes and weaknesses of the CIDC3 component; lthe effectiveness of World Bank/DFIDB collaboration; and loptions for the future.l

II Institutional Strengthening in RHD (IDC/CIDC3)

2.1 The DFID-funded CIDC3 project started in April 2003, which is a continuation of the previous

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DFID-funded IDC (Institutional Development Component). With a one-year extension, CIDC3 comes to an end in March 2006. Good progress has been made in developing and, to a lesser extent, implementing improved physical and financial management systems for road maintenance (HDM4 model for prioritisation; Roads and Bridges Asset Management System-RAMS; and the Central Management System- CMS).

2.2 In July 2004, DFIDB approved a five-year, £36 million programme of sector budget support for periodic road maintenance through RHD. In order better to manage fiduciary risk, DFIDB agreed with the Secretary, Finance, that four “milestones” of management effectiveness that would “trigger” disbursements of sector budget support. The “milestones” centred on prioritisation, tendering, specifications and quality assurance and required the effective use of the HDM4, RAMS and CMS systems installed with the help of CIDC3. Progress has been made against the “milestones” but there is still some reluctance in parts of RHD to make effective use of its new management systems.

2.3 Sector budget support is also linked to the establishment of an autonomous Road Maintenance Fund, with technical assistance being provided by CIDC3. Progress has been made, but we await Cabinet approval for the establishment of the Fund.

2.4 The main lesson learnt from CIDC3 and its predecessors is that internal restructuring and the development of better and more transparent financial and physical management systems will not by themselves deliver the “step change” in RHD’s performance that we are seeking. External pressure, to an extent from donors, but crucially from Government (Ministry of Finance, Ministry of Communications) is also required.

III World Bank /DFID Collaboration

3.1 Communications between the World Bank and DFID on RRMP3 are good. DFID has been kept fully informed about RRMP III and DFID has ensured that all CIDC3 review teams consult the World Bank. More generally, the Transport Local Consultative Group does an excellent job in providing a forum for communication across the donor community. However, the emphasis is on communication, rather than active collaboration.

3.2 Communication is not always enough. Active collaboration is sometimes needed. We would have welcomed a more active role by the World Bank in influencing Government in favour of a Road Fund.

3.3 Over the past year, DFID has been reviewing its involvement in the transport sector. This uncertainty - and more recently the uncertainty over the World Bank’s RSRP – has impacted on the dialogue between the two institutions. As the framework for DFID’s future support has been agreed in principle, it is important to strengthen dialogue with the World Bank.

IV The Future

4.1 DFID has agreed, in principle, to a three-year programme to;

Consolidate the gains made over the past 14 years in RHD;lManage effectively the fiduciary risk associated with sector budget support;lEstablish an autonomous Road Maintenance Fund; andlEnsure the continuation of a transport policy and coordination function in Government.l

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4.2 Over this period, DFID will be looking to other donors to play a greater role in any further institutional strengthening in RHD. Hence, dialogue and active collaboration between World Bank and DFID will be very important.

(c) Other partners (NGOs/private sector):

N/A

10. Additional Information

N/A

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Annex 1. Key Performance Indicators/Log Frame Matrix

Outcome / Impact Indicators:

Indicator/Matrix

Projected in last PSR1

Actual/Latest Estimate

1. Road accident fatality rate (fatality per 10,000 vehicles)

50 60

2. Reduction of Vehicle operating cost on upgraded roads (proxy: road roughness)

20 % 16 %

3. Reduction of core network in poor condition

10 % 15 %

Output Indicators:

Indicator/Matrix

Projected in last PSR1

Actual/Latest Estimate

1. Priority roads and bridges upgraded (a) Nalka-Bonpara road: 50 km; (b) Dhaka - Sylhet road: 220 km;

(a) 55 km; (b) 224 km;

2. No. of accident blackspot locations improved

30 35

3. No. of new road maintenance contractors established

10 15

1 End of project

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Annex 2. Project Costs and Financing

Project Cost by Component (in US$ million equivalent)AppraisalEstimate

Actual/Latest Estimate

Percentage of Appraisal

Component US$ million US$ millionA. Physical Investments 84.73(A1) Nalka-Hatikamrul-Bonpara (N-H-B)Road 59.64 50.97 85.46(A2) Dhaka-Sylhet (D-S) Road 146.00 123.95 84.9(A3) Improvement of Feeder Roads Type A (FRA) 78.50 59.93 76.34(A4) Narrow Bridges* 9.50 12.31 129.58(A5) Maintenance of RHD Roads 58.00 51.45 88.71(A6) Road Safety Improvement 16.60 13.40 80.72B. Institutional Development & Technical Assistance 34.13 27.86 81.63C. Land Acquisition & Resettlement 30.22 37.80 125.08D. 2000 Flood Restoration Component** 4.21

Total Baseline Cost 432.59 381.88 Physical Contingencies 64.89 52.09 Price Contingencies 31.08 34.09

Total Project Costs 528.56 468.06Total Financing Required 528.56 468.06

*The Narrow Bridges component, which was cofinanced by DFID, was separated from the RRMP-III project during the project implementation.**The 2000 Flood Restoration Project was added to the RRMP-III in 2001 after the flood in 2000 damaged many sections of the existing roads.

Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent)

Expenditure Category ICBProcurement

NCB Method

1

Other2 N.B.F. Total Cost

1. Works 329.90 100.00 0.00 11.60 441.50(180.00) (54.50) (0.00) (0.00) (234.50)

2. Goods 6.40 2.00 0.00 0.00 8.40(6.00) (2.00) (0.00) (0.00) (8.00)

3. Services 29.80 0.00 0.70 11.10 41.60(29.80) (0.00) (0.70) (11.10) (41.60)

4. Miscellaneous: Land acquisition and resettlement

0.00 0.00 0.00 37.00 37.00

(0.00) (0.00) (0.00) (0.00) (0.00) Total 366.10 102.00 0.70 59.70 528.50

(215.80) (56.50) (0.70) (11.10) (284.10)

Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent)

Expenditure Category ICBProcurement

NCB Method

1

N.B.F. Total Cost

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Other2

1. Works 345.38 22.88 0.00 15.12 383.38(187.22) (11.44) (0.00) (0.00) (198.66)

2. Goods 2.32 0.00 0.00 0.00 2.32(2.32) (0.00) (0.00) (0.00) (2.32)

3. Services 33.03 0.00 0.60 10.93 44.56(27.26) (0.00) (0.60) (0.00) (27.86)

4. Miscellaneous: Land acquisition and resettlement

0.00 0.00 0.00 37.80 37.80

(0.00) (0.00) (0.00) () (0.00) Total 380.73 22.88 0.60 63.85 468.06

(216.80) (11.44) (0.60) (0.00) (228.84)Footnotes:

1/ Figures in parenthesis are the amounts to be financed by the IDA Credit. All costs include contingencies.2/ Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff

of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units.

Project Financing by Component* (in US$ million equivalent)

Component* Appraisal Estimate Actual/Latest EstimatePercentage of Appraisal

IDA Govt. CoF. IDA Govt. CoF. IDA Govt. CoF.A. Physical Investments(A1) N-H-B Road 35.79 23.85 30.58 20.39 85.4 85.5(A2) D-S Road 87.60 58.40 74.37 49.58 84.9 84.9(A3) FRA Program 47.10 31.40 34.16 25.77 72.5 82.1(A4) Narrow Bridges 11.60 15.12 130.3(A5) Road Maintenance 11.61 46.39 9.20 41.68 79.2 89.8(A6) Road Safety 16.60 2.32 1.06 14.0B. ID & TA 20.97 11.10 22.38 16.54 2.19 106.7 19.7C. Resettlement 30.22 37.80 125.1D. 2000 Flood Restoration 4.21Physical Contingencies 36.19 28.70 34.01 18.08 94.0 63.0Price Contingencies 17.34 13.74 17.61 16.48 101.6 119.9Grand Total 273.20 232.70 22.70 228.84 221.91 17.31 83.8 95.4 76.3

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Annex 3. Economic Costs and Benefits

Summary

1. The Borrower performed an ex-post economic evaluation of the RRMP-III project, using a methodology and assumptions similar to that used at the time of appraisal. The evaluation focuses on the civil works component of the project, which comprises 81 percent of the total project cost. The most recent version of the Highway Development and Management Model (HDM-4) was used to simulate highway life cycle and vehicle operating conditions and costs for multiple road design and maintenance alternatives. The institutional component, while very critical to the overall success of the project, was not analyzed because of the difficulty in quantifying benefits from institutional improvements and its impact on the performance of the road sector. However, qualitative analysis of the project’s institutional development impact is given in section in the ICR.

2. Table 1 below summarizes the results of the ex-post analysis for the different civil works components and provides both the appraisal and ICR stage economic rate of returns (ERR) and Net Present Values (NPVs) for comparison. The ERR at ICR stage ranges from 48 percent for the Nalka-Hatikamrul new road construction to 128 percent for the periodic maintenance of national and regional highways. All ERR values at ICR stage are higher than those estimated during appraisal. This is because of higher than expected traffic volume for all project roads and lower than expected unit costs for the roads under the new construction and rehabilitation components. The sensitivity analysis conducted also shows that the project will remain economically viable under different risk scenarios that could reduce potential economic benefits (to be updated later).

3. The main quantified project benefits are savings by road users on vehicle operating costs and time costs. It is expected that, given the deregulated and highly competitive structure of road transport industry in Bangladesh, a large portion of the savings on commercial vehicles costs (which represent 69 percent of motorized, three-wheel and above, traffic composition) will be passed on to producers and consumers of goods transported by road and passenger traffic. The project will preserve the road network in an efficient and sustainable manner, which would increase export competitiveness, accelerate export-oriented growth and contribute to sustainable economic development.

Table 1: Summary of Results of Economic Analysis (Appraisal and ICR Values)

Length (km) NPV (US$ million) ERR (%)Appraisal ICR Appraisal ICR

N-H Road New Construction 55.0 812.0 397.42 15.0 48.00D-S Road Rehabilitation 223.6 4,147.0 13,154.6 30.0 54.0Improvement of Feeder

Roads385.7 2,002.0 2,205.9 27.0 49.0

Periodic Maintenance 627.7 4,218.0 13,159.9 75.0 128.0

Main Assumptions

4. The civil works component include (a) construction of a new road link, the Nalka-Hatikamrul-Bonpara road (55 km), (b) rehabilitation of Dhaka-Sylkhet Road (224 km), (c) rehabilitation and improvement of high priority Feeder Road Type A (385.7 km), and (d) maintenance of national and regional roads (628 km). The data for the evaluation was collected by the Road Maintenance Management System (RMMS) in RHD. The RMMS database includes road section basic data, road geometry, road condition, roughness data, and traffic data etc. that are required for the engineering

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evaluation of pavement performance.

5. Road Conditions and Traffic. The RMMS data has pre and post treatment conditions, as measured by the International Roughness Index (IRI) and traffic survey, which are updated periodically. The average pre-treatment IRI was 7.7 points, and ranges between 4.8 and 11.8, suggesting that the roads were in a quite bad condition. After the treatment, the condition of the road was reduced to an average of 2.2 IRI, providing road users with smooth riding surface. The average daily motorized traffic is 3,068, and ranges from 574 to 9,472. In addition, between 830 to 5,700 non-motorized users ply the project roads on a daily basis. The traffic growth rate assumed is 8 percent, which is used commonly in RHD HDM-4 analysis, and was the same growth rate assumed at appraisal for the fist ten years of the evaluation period.

6. Unit Costs. Costs were estimated in financial and economic terms (net of taxes), economic costs being on average 90 percent of financial costs. The average unit road works cost estimates are given in table 3, which shows a significant reduction in terms of the unit cost for most of the road works, except for maintenance, which increased from the estimated value, partly due to a higher level of work than anticipated.

Table 2: Financial Unit Costs

Length Cost (TK million)

Cost (US$ million)

Cost per km (US$)

Cost Per Km (US$)

(estimated at appraisal)

N-H Road New Construction

55.0 3,122.0 47.3 860,062.8 1,400,000

D-S Road Rehabilitation 223.6 8,567.2 129.8 589,656.4 799,000Feeder Road Improvement 385.7 3,413.3 51.7 134,103.2 192,000

Periodic Maintenance 627.7 2,628.5 39.8 103,268.3 70,300

7. Road user costs, including Vehicle operating costs and travel time, have been taken from the latest Road User Cost Report (which is included in the HDM-4 workspace used by RHD’s HDM Circle). The benefits have been quantified in terms of savings in Road users cost (RUC), which is a summation of vehicle operation cost (VOC) and travel time.

Economic Evaluation

8. Alternatives Considered. The economic evaluation considered two alternatives: with treatment/project and without project scenario. The with-project scenario considers the actual treatment done in the field and future maintenance that would be carried out during the analysis period. The without-project scenario, or base case, is simply undertaking routine maintenance to keep the road operational. The analysis was done for a twenty-year period. A discount rate of 12 percent has been assumed in the economic analysis.

9. Economic Benefits. Table 4 provides the breakdown of benefits from savings in VOC and reduction of travel time. Additional road user benefits, which were not quantified, include reduced accident rates and improved riding comfort. Ninety percent of the economic benefits accrue from the reduction in VOC. This is because in Bangladesh the value time is considerably low, while the conditions of the roads are bad, giving proportionally higher benefits to reduction in VOC. As expected, the VOC reductions were most pronounced for periodic maintenance works.

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Table 3: Summary of Economic Benefits

Length VOC Savings (million Taka)

Travel Time Savings (million Taka)

N-H Road New Construction

55.0 372.69 50.28

D-S Road Rehabilitation 223.6 17236.71 1863.89Improvement of Feeder

Road385.7 2959.94 134.82

Periodic Maintenance 627.7 12016.37 1668.7Total - 32585.71 3717.69

10. Economic Returns and Net Present Value. ERR and NPV were calculated for each of the roads evaluated and the results are provided in Table 5. The overall ERR is based on both road-wise ERRs and weighted average ERR and is significantly higher than the minimum 12 percent required for economic viability.

Table 4 Results of Economic Evaluation

Contract No. Start End Length (km) NPV EIRR

N-H Road New Construction1,2,3,4 Hatikamrul Bonpara 55 397.42 48%

D-S Road Rehabilitation1A Kanchpur Narsingdi 32.6 4213.98 89%2C Narsingdi Bhairab Ferry

Ghat37.8 3344.69 78%

1C Ashuganj Ferry Ghat

Jagadishpur 43.1 3606.37 77%

2B Jagadishpur Mirpur 31.39 569.75 31%2A Mirpur Auskandi 33.36 383.027 18%1B Auskandi Sylhet Rail Over

Bridge45.3 1036.75 31%

Total/Weighted Average 223.55 13,154.57 54%FDA Improvement Component

F1 Kotalipara Kandi Road 12 40.638 18%F9 Ishwardi Bagha Road 22.68 213.19 32%

F10 Bhandaria Kathalia Road 12.5 355.925 79%F13 Kushtia Chuadanga 20.2 13.14 14%F14 Sariatpur Goshairhat Road 19.1 188.03 44%F15 Kazipur Sherpur Road 29 294.71 43%F16 Tebunia Baghabari 20 85.44 25%F18 Tebunia Baghabari 20 51.553 27%F20 Barisal Babugonj 13.4 375.27 91%F21 Radhagonj Sadullahpur Road 12.43 154.76 36%F22 Rangpur Gaibandah 20 113.69 30%F23 Rangpur Gaibandah 23.4 45.447 114%F24 Rangpur Gaibandah 24.5 274.1 82%

Total/Weighted Average 249.21 2205.893 49%Periodic Maintenance Component

PM1 Jessore Magura 43 2045.57 84%

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PM2 Kumerkhali Pakshi 38 415.5 45%PM3 Rajbari Kumerkhali 50 1534.6 151%PM4 a) Gobindhgonj Rangpur 1674.53 192%

b) Palashbari Gaibandha94.9

190.39 84%PM5 a) Rangpur Saidpur 685.44 97%

b) Saidpur Beldanga 147.45 60% c) Barabari Lalmonirhat 108.82 151% d) Damoirhat Joypurhat 77.197 79% e) Lalmonirhat Patgram

187.15

198.57 165%PM6 a) Hatikamrul Bogra 1637.5 169%

b) Naogaon Patnitola 944.88 170% c) Kasinathpur Dasuria 2370.53 141% d) Rajshahi Noahatta

133.35

198.89 198%PM7 b) Noapara Bagherhat 257.56 89%

c) Jessore Narail54

672.48 174%Total/Weighted Average 600.4 13159.907 128%

Overall Total/Weighted Average 1219.9 28917.787 69.8%

11. Sensitivity Analysis.

The base economic viability indicators for the rehabilitation, maintenance and improvement components were subject to the following sensitivity analyses: (i) If the traffic benefits were to decrease by 20% the project's average EIRR would still be above the minimum requirement of 12% and (ii) With a 6% increase in traffic growth the average EIRR would be 67.34% and the project would remain viable.

For the NH Road New Construction, if the traffic benefits decreased by 20% the EIRR would be 31.3% and if annual traffic increased by 6% then the EIRR would be 26.66%. All interventions on the selected corridors are economically viable even if benefits decrease and traffic volume increases.

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Annex 4. Bank Inputs

(a) Missions:Stage of Project Cycle Performance Rating No. of Persons and Specialty

(e.g. 2 Economists, 1 FMS, etc.)Month/Year Count Specialty

ImplementationProgress

DevelopmentObjective

Identification/Preparation08/18/1995

Appraisal/Negotiation11/27/199706/04/1998

Supervision07/13/2000 7 TM,2TE,TS,RS,PC,FMS S S11/30/2000 6 TM,2TE,RS,PC,DS S S06/06/2001 8 2TE,TS,2PC,RS,DS,FMS S S12/06/2001 9 TM,2TE,TS,PC,FMS,DS,RS,ES S S04/03/2002 7 2TE,TS,RS,RA,FMS,DS U S11/28/2002 8 TM,TS,TE,RS,PC,FMS,DS,ES S S06/19/2003 7 TM,TS,TE,HE,RS,2FMS S S02/29/2004 9 TM,TS,2TE,RS,FMS,2ES,PC S S11/12/2004 9 TM,TS,TE,HE,RS,FMS,RA,ES,P

CS S

06/13/2005 8 TM,2TS,PC,RS,FMS,ES,OO S S

ICR10/27/2005 9 TM,EC,2TE,RS,ES,FM,PC,

RAS S

DS=Disbursement Specialist;EC=Economist;ES=Environmental Specialist;FMS=Financial Management Specialist;HE=Highway Engineer;HMS=Highway Maintenance Specialist; ITS=Institutional Development or Training Specialist; OO=Operational Officer;PC=Procurenment Specialist;RA=Research Analyst;RS=Resettlement Specialist;TE=Transport Engineer;TM=Task Manager;TS=Transport Specialist.

(b) Staff:

Stage of Project Cycle Actual/Latest EstimateNo. Staff weeks US$ ('000)

Identification/Preparation 71.20 138.90Appraisal/Negotiation 52.30 318.00Supervision 339.10 606.80ICR 22.16 30.60Total 484.76 1,094.30

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Annex 5. Ratings for Achievement of Objectives/Outputs of Components(H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable)

RatingMacro policies H SU M N NASector Policies H SU M N NAPhysical H SU M N NAFinancial H SU M N NAInstitutional Development H SU M N NAEnvironmental H SU M N NA

SocialPoverty Reduction H SU M N NAGender H SU M N NAOther (Please specify) H SU M N NA

Private sector development H SU M N NAPublic sector management H SU M N NAOther (Please specify) H SU M N NA

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Annex 6. Ratings of Bank and Borrower Performance

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory)

6.1 Bank performance Rating

Lending HS S U HUSupervision HS S U HUOverall HS S U HU

6.2 Borrower performance Rating

Preparation HS S U HUGovernment implementation performance HS S U HUImplementation agency performance HS S U HUOverall HS S U HU

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Annex 7. List of Supporting Documents

Aide memoires, preparation missions for RRMP III, by World Bank, 1995-19981.Aide memoires, supervision missions, by World Bank, 2000-20052.Borrower’s Project Implementation Completion Report, by RHD, June 20053.Cement Concrete Pavement: for better and safer roads in Bangladesh, Concept Analysis Report, by 4.

Finnroads, December 2004Country Assistance Strategy for Bangladesh, by World Bank, March 6, 19985.Country Assistance Strategy for Bangladesh, by World Bank, February 8, 20016.Implementation Completion Report, The Second Road Rehabilitation and Maintenance Project, by 7.

World Bank, April 18, 2001Interim Fund Development Credit Agreement, conformed copy, by World Bank, October 21, 19988.Preliminery assessment on road maintenance in RHD, by World Bank, May 20059.Project Appraisal Document for RRMP III, by World Bank, June 26, 199810.Project Status Reports, No.1~18, by World Bank, 1999-200511.Quality at Entry Assessment (QEA), final report, by World Bank, June 2, 199812.Quarterly Progress Reports for civil works, equipments, and institutional development, by RHD and 13.

consultants, 2000-2005Output to Purpose Review of the CIDC component, final report, by Atkins, January, 200514.Review of Environmental and Social Safeguards in Transport and Urban Sector Projects in 15.

Bangladesh, by World Bank, August 2005

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